Silver market expected to run sixth straight supply deficit this year

The silver market is projected to run its sixth straight structural supply deficit in 2026 as investment demand remains high.

Based on preliminary data compiled by the Silver Institute, silver demand outstripped supply by about 95 million ounces last year, leading to the fifth straight market deficit. Including the projected 2025 shortfall, the 5-year market deficit will climb above 800 million ounces, an entire year of mining output.

The Silver Institute projects a deficit of around 67 million ounces in 2026.

This underscores the key dynamic driving the silver market right now – there simply isn’t enough metal.

When demand outpaces supply (mining output + recycling), silver consumers must tap into existing above-ground stocks. This drives prices higher as those holding silver aren’t keen to give it up at a lower price.

Silver supply and demand dynamics

Industrial and jewelry demand dropped in 2025 due to the rapidly rising price, but there was robust investment demand, especially late in the year. This trend is expected to continue into 2026, as the Silver Institute noted that the dynamics driving the silver market to record highs that scaled $120 an ounce remain “firmly in place.”

“These include tight physical supply in London, a volatile geopolitical backdrop, U.S. policy uncertainty, and concerns over the Federal Reserve’s independence. In addition, silver’s underlying supply-demand fundamentals remain supportive.”

Looking ahead, the Silver Institute projects global demand will remain largely unchanged this year, with strong retail investment demand offsetting sluggishness in industrial and jewelry due to the higher price.

Industrial demand is expected fall about 2 percent to a 4-year low of 650 million ounces. Price pressure is expected to accelerate efforts to substitute less costly metals for silver in the solar energy sector. According to the Silver Institute, “While global solar installations are expected to continue rising, ongoing thrifting and outright substitution away from silver will result in falling silver PV demand.”

However, silver demand will likely remain robust in the computing sector as companies continue to build data centers and other AI-related technologies.

Jewelry demand is also expected to drop for the second straight year in 2026 as high prices squeeze the market.

Falling demand in these sectors will be largely offset by physical investment demand. The Silver Institute forecasts bar and coin demand will rise by 20 percent to a three-year high of 227 million ounces as Western investors finally jump on the bandwagon.

“After three consecutive years of decline, Western physical investment is expected to recover in 2026, as silver’s exceptional price performance and ongoing macroeconomic uncertainty rekindle investor interest.”

The Silver Institute also expects investment demand in India to build on last year’s substantial gains amid positive investor sentiment. Keep in mind, it was a surge in Indian demand that sparked the first silver squeeze that pushed the price above $50 for the first time.

On the supply side, mine production and recycling are both expected to grow, driving a 1.5 percent supply increase to a decade-high 1.05 billion ounces.

The Silver Institute remains bullish on the silver price, despite the recent correction that pushed prices back to the $80 level.

“The global economic and geopolitical environment is likely to remain supportive for precious metals prices in 2026. In addition, physical liquidity in the London silver market may remain relatively tight. Furthermore, a still-supportive macroeconomic backdrop and forecasted strength in gold should help limit downside risks for the silver price, even though heightened price volatility will remain a feature for the foreseeable future.”